Use Cases

The many different Services which Cassini provide share a consistent analytics layer and the individual Services can be combined to address a wide range of challenges across the trade lifecycle. There are many different ways to apply these tools, including the use cases below which we have seen clients addressing.

We find clients coming up with new ideas all of the time, and your organization may have different needs to those below. In all cases Cassini can offer a robust, integrated and coherent solution.

What If Margining

Visibility of margin impact is a pre-requisite for OTC derivative trading, whether cleared or bilateral. Estimation of margin on a new trade must:

Reflect the full portfolio impact, and include broker as well as clearing margin

Integrate with the existing execution or portfolio construction tools and workflow

Firms may test the margin impact of a trade idea before submitting an order for execution, or as part of the execution decision itself. It may be part of an in house portfolio construction tool, or within an OMS or EMS, but at whatever stage, the key is transparency of the portfolio impact of new trades including all broker charges.

The Cassini Pre-Trade Margin Estimation Service can be called from within your existing tools or spreadsheets, or can be connected to your OMS automatically. Our open API and data integration layers allow for easy plug in of Cassini to any existing system or workflow.

Best Execution

Best execution is more than just agreeing the best bid-offer and taking the price. True best execution requires that you also factor in the projected carry cost of a trade as well as upfront costs.

For marginable trades this means estimating the cost of funding the collateral that will support the trade over its expected holding period, as well as related costs such as clearing charges, and then factoring that into the quotes received in order to generate an adjusted price and prove true best execution.

In addition, it is key to be able to audit trade decisions after the event, and validate what the projected cost and all-in price estimate was before a trade execution.

The Cassini Pre-Trade Lifetime Cost Service calculates all factors that are included in a complete Lifetime Cost Analysis (LCA) of any portfolio or proposed new trades. All the key cost factors are configurable to your requirements and typically include cost of funding, cash rebates, clearing and broker fees and operational fees.

For example, to test a new cleared IRS that is a projected one year hedge trade, you call Cassini specifying the trade(s) and 1Y holding period. Cassini knows the live portfolio from both the external broker and internal trading book perspective and will calculate the full PV of the projected holding costs including factoring in change of IM over the life of the trade.

Trading Rules Compliance

Market regulations require that certain OTC trades are executed on venue or are mandatorily cleared, whereas other trades have more flexibility over the type of arrangement they are executed under.

Portfolio managers or traders must validate all mandatory obligations on a trade prior to execution: to ensure full compliance but, equally for visibility on where regulations may permit more flexibility

To test these rules needs knowledge of attributes of the firm itself, the existing portfolio, and the various rules defined by regulators and exchanges. This also needs to be instantly accessible from Pre-Trade decision tools as well as the execution platform.

The Cassini Trading Obligations Rules Service uses the Cassini common data layer to model all of the data points required to evaluate regulator and clearing house rule sets.
These trade rule checks are made available via a simple to use webservice API that can be called from any existing system, whether in house or third party.

Additional in house obligation rules can also be added as required and accessed via the same service call.

Margin or Collateral Cost

The ability to attribute use of capital in the form of collateral back to the trading books and portfolios that own the trades is becoming more important for many firms. This allows a more accurate reflection of the P&L of any trade or hedge strategy and also a fairer comparison of performance between different strategies.

Cassini offers a flexible margin attribution workflow that overlays the counterparty collateral portfolios with the fund and portfolio trading hierarchy, and allows a flexible definition of the attribution ratios to meet the approach of your treasury department.

Collateral Optimization

In an age where collateral is increasingly constrained and costly for both sides of a transaction it is essential to have a fully optimized process for selecting collateral to allocate as part of your End of Day process. An optimized allocation model can be implemented regardless of whether you have an in-house collateral management system, operate off a semi-automated workflow in Excel, or outsource the collateral management.

A modern collateral optimization process needs to factor in all of the front office requirements and costs of using different assets as collateral, including liquidity issues, as well as fully reflecting the operational constraints of physical movement of assets.

Collateral optimization also means the ability to identify cost efficient opportunities to replace collateral when assets are required for trading purposes, and to take a holistic view across all agreements.

The Cassini Collateral Optimization Service is a fully featured optimization engine that supports all of these needs and more. As it is called via the simple webservice API it can be integrated into your existing system or workflow as required.

Counterparts Limits

When using multiple FCMs and bilateral counterparties it is important to ensure active monitoring of agreed thresholds whether those are defined by gross notionals, DV01 or margin levels. These agreements and the thresholds are too often only monitored on a T+1 basis because the relevant agreement and portfolio information is not available to the front office systems.

Cassini sits behind the front office trading systems and provides transparency on the external agreement portfolios. The powerful, rules driven, limits engine can model any kind of constraint or threshold defined externally or internally on counterparty trading or clearing brokers. The simple API allows these limits to be checked from any stage of the Pre or Post Trade process flow.